Following strong relative outperformance from the banking and the financial stocks, the NIFTY staged a remarkable recovery from its lows before continuing to end on a negative note. The markets opened with a gap down once again; they continued getting weaker until the afternoon trade. However, after it marked a low of 16866 and when the NIFTY was down 400-points at one point in time, the markets staged a remarkable recovery from the low point. The index managed to rebound over 270-points from its lows but saw some corrective pressure once again. It settled at 17110.15 with a net loss of 167.80 points (-0.97%).
The markets also saw expiry of the January derivative series; the session remained influenced by the rollovers. The highest Put OI stood at 17100; this made sure that the NIFTY settled above that point. Banknifty and the Financial Services index strongly outperformed the front line NIFTY. However, broader markets did not perform at all as while Banknifty gained 0.73%, the NIFTY Midcap100 Index 1%. While the NIFTY has made a strong attempt to form a base around current levels, moving past the 17200-17300 zone will be crucial for a sustainable up move to occur. The NIFTY still has a possibility of staying under corrective pressure if this zone is not taken out convincingly.
Volatility cooled off a bit; INDIAVIX came off by 1.37% to 21.0650. Friday is likely to see the levels of 17190 and 17250 acting as resistance points. The supports will come in at 17000 and 16900 levels. Just like the previous session, the trading range is once again likely to stay wider than usual.
The Relative Strength Index (RSI) on the daily chart is 37.24; it shows a mild bearish divergence against the price. The daily MACD is bearish and trades above the signal line.
Despite the markets staging a strong recovery from the lower levels, the NIFTY has not only ended on a negative note but the broader markets have also put on a weak show. The market breadth remained weak. The markets may still show attempts to rebound and move higher; the structural weakness still persists. Also, the zone of 17200-17300 remains a strong resistance zone for the markets. It would be imperative for the NIFTY to move past this level; until this happens the index will not be completely out of the woods and it would remain prone to corrective weakness. It is recommended to avoided large exposures and adopt a highly selective approach towards the markets.
This was first published by The Economic Times.
Milan Vaishnav, CMT, MSTA
Consulting Technical Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)
